Needham has increased its price objective for Allegro MicroSystems Inc. (NASDAQ: ALGM) to $45 from $41 and maintained a Buy recommendation on the stock. The revised target equates to approximately 17% upside relative to the most recently quoted price of $38.59. At the same time, independent data indicates the shares may be trading above their fair value on a fundamental basis.
The adjustment follows Needham’s attendance at Allegro’s Analyst Day in Boston, where management laid out a 3-5 year target financial model. The company’s guidance calls for revenue expansion in the mid-teens percentage range, a non-GAAP gross margin exceeding 55%, an operating margin above 32%, earnings per share north of $2.00 and free cash flow conversion in the 20-25% band. Those targets are notable given that Allegro was not profitable over the most recent twelve-month period, posting a diluted EPS of -$0.07. Analysts, however, forecast a return to positive earnings with EPS of $0.53 projected for fiscal 2026.
Management expects the company’s total serviceable addressable market to increase to $13.7 billion by fiscal year 2031, which represents a 12% compound annual growth rate. Allegro’s prioritized end markets - advanced driver-assistance systems (ADAS), electric vehicles (EVs), data centers and robotics - are singled out to grow at a faster clip, with a 21% compound annual growth rate to an $8.4 billion opportunity by fiscal 2031.
Recent top-line trends show revenue growth of 8.67% over the last twelve months, with analyst projections calling for an acceleration to 22% growth in fiscal 2026. Needham pointed to Allegro’s leadership in tunnel magnetoresistance (TMR) sensors and isolated gate drivers as structural advantages that should support outsized growth across automotive, data center and robotics end markets.
During the Analyst Day, management described a realignment of the company’s sales organization from a geographic focus to an end market focus, a change intended to better align sales efforts with customer priorities and secular demand trajectories. On the balance sheet, Allegro operates with a moderate level of debt and retains strong liquidity, reflected in a current ratio of 3.65, indicating that liquid assets substantially exceed short-term obligations.
Needham’s new $45 target is derived from applying a 35-times multiple to its fiscal 2028 non-GAAP EPS estimate of $1.30. That approach to valuation is consistent with Allegro’s current premium trading multiples, with data showing the shares trading at elevated multiples across several metrics.
Separately, Allegro reported third-quarter fiscal 2026 results that topped analyst expectations. The company delivered an EPS of $0.15 versus a consensus forecast of $0.14, a 7.14% positive surprise, and generated revenue of $229.2 million against an expected $220.79 million.
Market participants have begun adjusting their views in response to these developments. Morgan Stanley upgraded Allegro’s rating from Equalweight to Overweight and assigned a $51.00 price target, citing the company’s growth potential within automotive applications.
On the product front, Allegro introduced the ACS37017 Hall-effect current sensor, expanding its high-performance portfolio for power electronics. The company positions the new sensor for high-voltage power conversion systems in applications such as AI data centers and electric vehicles. In addition to product innovation, Allegro announced two leadership promotions: Ian Kent was elevated to Senior Vice President, Operations, and Jamie Haas was promoted to Vice President, Chief Technology Officer.
Taken together, the Analyst Day targets, recent quarterly beat, product launch and executive promotions underscore management’s continued emphasis on innovation and market leadership within semiconductor segments that serve automotive, data center and robotics customers. Needham’s valuation-based upgrade of its price target signals confidence in that strategy, while market valuation metrics suggest investors are already pricing a premium for expected growth.